MOSL: INDIA CEMENTS (Neutral)-Cost-efficiency initiatives partially offset realization impact
India Cements: Cost-efficiency initiatives partially offset realization impact
(ICEM IN, Mkt Cap USD0.7b, CMP INR161, TP INR148, 9% Downside, Neutral)
- Realizations decline QoQ due to weak pricing: Volumes were muted at 2.73mt (+3% YoY) v/s est. of 2.76mt, as demand was impacted in core markets of TN and Kerala. Blended realizations declined 5% QoQ/7% YoY to INR4,450/t (est. of INR4,845) due to weak prices in south market. Revenue declined 4% YoY to INR12.1b (est. of INR 13.4b) due to lower realizations.
- Cost-efficiency measures arrest margin contraction: Cost/t fell 6% YoY/5% QoQ due to lower employee cost, led by rationalization of manpower cost. The sequential decline in cost/t was further driven by lower freight cost/t. EBITDA/t fell 14% YoY/9% QoQ to INR614 (est. of INR674). Margin stood at 13.8% (-1.08pp YoY, -0.52pp QoQ). Hence, EBITDA fell 11% YoY to INR1.67b (est. of INR1.86b). Interest cost was higher by 8% YoY (+4% QoQ) at INR924m due to inclusion of one-time cost toward foreclosure of foreign currency borrowings. PAT stood at INR152m (-57% YoY) v/s est. of INR294m.
- Key takeaways from conference call: 1) Supreme Court’s stay order on sand mining ban in Tamil Nadu should revive demand. 2) Power cost declined due to usage of low-cost Indonesia coal. 3) Trade to non-trade mix was 65:35. 4) Overall capacity utilization for the company is at 70-75%.
India Cements is engaged in the manufacturing and selling of cement. Co. also is engaged in providing power generation from wind farms. Co. owns two brands of cement in India namely: Sankar cement and Coromandel cement. Through its subsidiaries, Co. is engaged in the investment of equity shares; the transportation of coal and other raw materials; and the provision of logistics support in the form of contract and market truck management and scheduling. Co.'s manufactured products include cement, calcium carbide and textiles. As of Mar 31 2003, production and sale of cement were 4,946,000 tonnes and 4,999,000 tonnes, respectively.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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